Sprinkling a little celebrity stardust on Silicon Valley

Snoop Dogg is raising a venture capital fund to invest in the marijuana industry.

That’s not a headline from The Onion. The hip-hop star is indeed putting together a $25 million fund to invest in marijuana-related industries, according to TechCrunch.

He is part of a growing wave of celebrities — including Justin Bieber and Ashton Kutcher — investing in start-ups. It is easy to interpret this phenomenon as a possible sign of the coming apocalypse, but it may be something more, highlighting the always precarious nature of the venture capital industry itself.

Celebrities have always tried to make extra money through investments and endorsements. Elizabeth Taylor had a clothing line and a perfume. Planet Hollywood, which fell into bankruptcy, was started with help from Sylvester Stallone, Bruce Willis, Demi Moore and Arnold Schwarzenegger.

These kinds of investments and endorsements were different. Celebrities were trying to cash in on their fame, selling or investing in things that their association would enhance. Sean Combs may have known little about selling vodka when entered into a deal with Diageo to market Ciroc, but he knew a lot about style.

The model now is Bono, U2’s lead singer, who invests without trying to leverage his celebrity to make that investment work.

In 2004, he joined the venture capital firm Elevation Partners. The idea was that Bono could be a visionary in the media and technology world. Bono may be the coolest person on earth, but that coolness didn’t really translate for Elevation Partners. The firm made some pretty bad investments in Palm and others, and was saved only by a big trade in shares in Facebook before its initial public offering. It returned a fair profit to its investors, but the fund has not raised a new round of money. In short, it is hard to see how much value Bono provided.

This hasn’t stopped him, however. Bono and Mr. Kutcher recently announced that they would be advisers to the private equity firm TPG Capital on investments. Bono may do better this time around, but one wonders what value he brings to TPG other than that 1980s-era hipness.

There is a certain cachet with all that stardust, of course, and perhaps some free publicity. As far as investing goes, however, some might cynically suggest that celebrities’ dollars are merely dumb money that companies are happy to take.

But there is more to it.

In the venture capital industry, profile is important. Andreessen Horowitz, for example, arguably gets better deals because it is known for paying fat prices and hitting some big home runs in its venture investments. In such a competitive market, a celebrity investor is like another badge. It is a sign of honor and a signal that someone important cares about you.

This is the stardust theory, but again, there is more here. Celebrity investing may really be about the thing that drives Silicon Valley — networking. One top venture capital lawyer recently mentioned to me that he attends more 100 lunches a year. That’s a lawyer.

And celebrities are good at networking and dealing with people.

Some are clearly working hard to be successful. Perhaps the most ambitious celebrity V.C. is Mr. Kutcher, who has made 41 investments through his firm, A-Grade Investments, according to CrunchBase. The investments include Airbnb, which is most likely a huge winner. (Mr. Kutcher was also an investor in Secret, the start-up that recently shut down.)

The rapper Nas and his manager have invested in 40 start-ups including Washio. Jessica Alba’s Honest Company says it has a valuation of $1 billion, and Dr. Dre sold the company he co-founded, Beats Electronics, to Apple for $3 billion.

In some sense, these successes are a result of an easy money environment of low interest rates and sky-high valuations. Everyone is throwing money at start-ups, and these celebrities are simply cashing in and investing.

Whether or not Silicon Valley is in a bubble, there will be an inevitable downturn at some point. And there will be a shakeout among celebrity investors. Those most likely to take a hit are those investing in companies that are seeking publicity but maybe not the best ideas.

Take the start-up Viddy, once promoted as the Instagram for video. It used to be hot, hot, hot, and it attracted Jay Z, Shakira and Will Smith as investors. At the end of last year, it shut down.

If it all comes crashing down in tears, you can bet that many a celebrity will exit first. Yet even if some big names depart, the celebrity V.C. will remain a fixture in Silicon Valley. Actors, hip-hop performers and rock stars appear to be just as skilled at meetings and networking as traditional venture capitalists. Apparently, the worlds of pop and tech share a common urge: to find the next big thing.

A shakeout may not happen any time soon, but in the small world of Silicon Valley, now more than ever everyone is a repeat player and cozy with one another. No one has an incentive to slow down the money-go-round. Instead, it is all about networking and making sure all of your contacts are happy. And that just may drive the bubbles higher.

So laugh all you want. Celebrity V.C.s are a sign of a bubbling market. But they are also a sign that perhaps the skill-set most valued in Silicon Valley is not what you know, but who. It’s a skill that may work for now, but is something that dooms Silicon Valley to a cycle of booms and busts.

Steven Davidoff Solomon is a professor of law at the University of California, Berkeley. His columns can be found at nytimes.com/dealbook. Follow @StevenDavidoff on Twitter.